US ARRC Issues Supplemental Spread Adjustment Consultation and Guide for Using SOFR Index for Floating Rate Notes

On May 6, 2020, the US Alternative Reference Rates Committee (ARRC) released a supplemental consultation seeking further market views on certain outstanding technical details for its recommended spread-adjustment methodology. This follows ARRC’s recent announcement that this methodology will be based on a historical median over a five-year lookback to calculate the difference between USD LIBOR and SOFR and, for consumer products, on an additional recommendation of a one-year transition period.

Also on May 6, 2020, ARRC’s Floating Rate Notes Working Group released a statement to provide market participants with information about how the New York Fed’s published SOFR Index may be referenced in floating rate notes. The statement includes structuring considerations as well as a sample term sheet for floating rate notes referencing the SOFR Index.